Alicanto Minerals Ltd (ASX:AQI) is drilling at the highly prospective Greater Falun Project in in Sweden with the first batch of assay results expected in Q4 2020.
The company will likely continue drilling in the near term with assay results likely to maintain a steady news flow.
PAC Partners has initiated coverage on AQI with a Speculative Buy recommendation and a price target of 30 cents per share (current share price: 19 cents).
The following is an extract from PAC Partners’ initiation report:
KEY POINTS
- Alicanto Minerals (AQI) own the highly prospective Greater Falun project in the Bergslagen district, Southern Sweden. The area is home to world class deposits including Garpenberg (168.5mt @ 3.4% Zn, 1.6% Pb, 0.3g/t Au, 98.0g/t Ag), and Zinkgruvan (46.9mt @ 9.0% Zn, 3.6% Pb, 2.0% Cu, 78.7g/t Ag)
- Currently drilling along strike from Falun, a historic world class mine. The now closed, Falun mine produced 28mt @ 5.0% Zn, 2.0% Pb, 4.0% Cu, 4.0g/t Au, and 35.0g/t Ag is directly along strike from a number of AQI prospects identified via high grade rock chip samples outcropping at surface correlating with EM anomalies. If a Falun scale deposit were to be discovered today, we estimate the value could be well in excess of $1bn.
- A new geological interpretation. The AQI team believe the district’s mineralisation is actually a copper-gold skarn rather than the previously held idea of a series of VMS systems. This model has opened the door to vast new prospects that had previously been left unexplored in a region that has had operating mines for more than 1,000 years. Geological mapping and a small initial drilling campaign appear to prove this theory correct with the discovery of distal and proximal skarn mineralisation. Highlights from initial rock chip samples from a number of outcropping prospects with grades up to 11.9% Cu, 2.9g/t Au and 11% Zn have been reported.
- The exploration team is headed up by the world’s preeminent geologist when it comes to the Bergslagen region. Chief Geologist, Erik Lundstam is a Swedish national and previous chief geologist for Boliden. Erik has been the driving force behind the re-interpretation of the Falun mineralisation to a copper-gold skarn rather than a VMS style. Erik has substantial personal investment in AQI, holding 6m shares of 2.1% of the Company. He is highly incentivised to prove his mineralisation theory correct.
INVESTMENT VIEW – SPECULATIVE BUY
We are excited by exploration potential at AQI. The geology team is headed by arguably the worlds specialist in Bergslagen geology who is heavily incentivised for exploration success. The re-interpretation of the district geology will provide a suite of new drill targets that have been untested using modern exploration techniques. We see moderate downside risk from here and see significant upside on near term exploration success. The discovery of a project of even half of Falun’s scale (which could arguably be worth +$1bn) would see a colossal rerating event which we believe justifies a ticket on what should be an exciting ride. Our short-term valuation of $0.30/sh is based on assumed exploration success. We initiate coverage on AQI with a Speculative Buy recommendation and a price target of $0.30/sh.
NEAR TERM CATALYSTS
Drilling Assays Q4 2020 – Drilling is underway in Sweden with the first batch of assay results expected in Q4 2020.
Ongoing drilling and exploration results 1H 2021 – AQI will likely continue drilling in the near term with assay results likely to maintain a steady news flow. A major high-grade copper/gold intersection would be sure to excite the market.
Arakaka Strategy 2H 2020 – A strategy on extracting shareholder value from the Arakaka project will likely be made clear by the end of this year. We believe a divestment being the likely option.